SEC Info℠

Home

Search

My Interests

Help

Sign In

Please Sign In

United Continental Holdings, Inc. – ‘11-K’ for 12/31/07

On:  Monday, 6/30/08, at 5:28pm ET   ·   For:  12/31/07   ·   Accession #:  1193125-8-144243   ·   File #:  1-06033

Previous ‘11-K’:  ‘11-K’ on 6/27/08 for 12/31/07   ·   Next:  ‘11-K’ on 6/29/09 for 12/31/08   ·   Latest:  ‘11-K’ on 6/25/13 for 12/31/12

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

 Text Wildcards:  ? (any letter/digit),  * (many).  Search Logic:  for Documents:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).  Details... 

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/30/08  United Continental Holdings, Inc. 11-K       12/31/07    2:6.4M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 11-K        Annual Report of an Employee Stock Purchase,        HTML   5.57M 
                          Savings or Similar Plan                                
 2: EX-23.1     Consent of Independent Registered Public            HTML      6K 
                          Accounting Firm                                        

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 11-K

For the fiscal year ended December 31, 2007

OR

For the transition period from              to             

Commission file number: 001-06033

United Airlines Pilot Directed Account Plan

Benefits Administration – WHQHR

United Air Lines, Inc.

P.O. Box 66100

Chicago, IL 60666

UAL Corporation

77 W. Wacker Drive

Chicago, Illinois 60601

(312) 997-8000

Table of Contents

UNITED AIRLINES PILOT DIRECTED ACCOUNT PLAN

TABLE OF CONTENTS

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees and Participants of the

United Airlines Pilot Directed Account Plan

We have audited the accompanying statements of net assets available for benefits of the United Airlines Pilot Directed Account Plan (the “Plan”), as of December 31, 2007 and 2006, and the related statement of changes in net assets available for benefits for the year ended December 31, 2007. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2007 and 2006, and the changes in net assets available for benefits for the year ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules of (1) assets (acquired and disposed of within the plan year) for the year ended December 31, 2007 and (2) assets (held at end of year) as of December 31, 2007, are presented for the purpose of additional analysis and are not a required part of the basic financial statements, but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These schedules are the responsibility of the Plan’s management. Such schedules have been subjected to the auditing procedures applied in our audit of the basic 2007 financial statements and, in our opinion, are fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.

- 1 -

Table of Contents

UNITED AIRLINES PILOT DIRECTED ACCOUNT PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

AS OF DECEMBER 31, 2007 AND 2006

(In millions)

See notes to financial statements.

- 2 -

Table of Contents

UNITED AIRLINES PILOT DIRECTED ACCOUNT PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

FOR THE YEAR ENDED DECEMBER 31, 2007

(In millions)

See notes to financial statements.

- 3 -

Table of Contents

UNITED AIRLINES PILOT DIRECTED ACCOUNT PLAN

NOTES TO FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2007 AND 2006, AND FOR THE YEAR ENDED DECEMBER 31, 2007

The following description of the United Airlines Pilot Directed Account Plan (the “Plan”) is for general information purposes only. Participants should refer to the Plan document for more complete information.

General and Plan Participants—The Plan is a defined contribution plan covering all employees of United Air Lines, Inc. (“United” or the “Company”) who are represented by the Air Line Pilots Association, International (“ALPA”). United pilots are eligible to become participants in the Plan on their date of hire. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Trustee and Record Keeper—The Russell Trust Company (“Russell” or “Trustee”) serves as Plan Trustee. Per the United Airlines, Inc. Pilots’ Directed Account Plan Trust Agreement, Russell is responsible for many aspects of the trust, including administration and the management and custody of all Plan assets. As approved by the Retirement and Welfare Administration Committee appointed by the Board of Directors of the Company, Russell has hired The Northern Trust Company to serve as sub-custodian of the Plan and Hewitt & Associates to serve as the subagent performing the participant recordkeeping functions.

Equity Distribution—On February 1, 2006, UAL Corporation (“UAL”) and United emerged from bankruptcy protection. The Bankruptcy Court’s approval of the Company’s Plan of Reorganization provided employees with shares of new stock in UAL upon exit from bankruptcy. The distribution for employees is in direct proportion to the labor savings of each employee group provided during the bankruptcy reorganization process.

For eligible pilots, approximately 5% of the ALPA shares were allocated to pilots on furlough status with the remainder allocated to active pilots on a seniority-based formula.

UAL shares were deposited directly into the Plan to the extent allowable under section 415(c) of the Internal Revenue Code. Any additional equity beyond these limits was distributed in the form of cash. An equity distribution of $184,272 occurred on April 27, 2007 related to the 2006 Plan year, and is included in Employer contribution receivable in the Statement of Net Assets Available for Benefits at December 31, 2006. Additional distributions occurred on November 8, 2007 for $9,109,389 and are included in Employer contributions in the Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2007. Some pilots opted to have United sell their claim to these shares in advance of United’s emergence from bankruptcy. The cash proceeds from this sale were distributed in the same manner as the shares distribution which included contributions to the Plan.

Convertible Notes Distribution—The Bankruptcy Court’s approval of the Plan of Reorganization provided that UAL convertible notes be issued to eligible employees to partially offset the retirement benefits that active employees lost when United’s defined benefit pension plans were terminated. For ALPA, eligible employees include those who were on the United Pilots’ System Seniority list as of January 1, 2005.

- 4 -

Table of Contents

In ALPA’s case, $550 million face amount of convertible notes were sold and a portion of the proceeds were distributed to eligible participants to the extent allowable under section 415(c) of the Internal Revenue Code. Allocation among the eligible participants was based on a pilot’s projected benefit to age 60 considering recoveries from the PBGC. Distribution proceeds of $185,476,994 from the sale of UAL convertible notes as part of the bankruptcy reorganization occurred on March 8, 2007, of which $4,716,419 and $180,760,574 related to plan years 2006 and 2007, respectively. The amount related to the 2007 plan year is included within Employer Contributions in the 2007 Statement of Changes in Net Assets Available for Benefits.

Contributions—There are several types of contributions that may be made to the Plan on participants’ behalf:

Participant Accounts—Individual accounts are maintained for each Plan participant. Each participant’s account is credited with the contributions, and Plan earnings, and charged with withdrawals and an allocation of Plan losses and administrative expenses. Allocations are based on account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.

- 5 -

Table of Contents

Investments—Participants direct the investment of their contributions and account balances in 1% increments into the following various investment options offered by the Plan:

Vesting—Participants are vested immediately in their contributions and the Company’s contributions, plus actual earnings thereon, and the balance of a participant’s account is nonforfeitable at all times. Accordingly, there are no forfeitures under the Plan.

Participant Loans—Active employees receiving regular pay from the Company may borrow from their fund accounts. A loan may not exceed $50,000 minus their highest outstanding loan balance over the last 12 months or one-half of their Plan account balance, whichever is less. The minimum that may be borrowed is $1,000. Loans will be funded by a pro-rata transfer from the assets of the account invested in the investment funds (excluding Individual Brokerage Accounts). The loan is secured by the participant’s account balance, and is generally repaid through payroll deductions on an after-tax basis for the term of the loan, which is a maximum of 60 months. The term of the loan may be extended to a period up to 15 years if the loan is used to acquire a principal residence. Loans are subject to an annual interest rate at one percent above the prime rate listed in the Wall Street Journal on the business day preceding the effective date of the participant request (interest rates ranged from 5% to 10.5% at December 31, 2007). Participants may only have one loan outstanding at any time. Participants are eligible to request a new loan 30 days after full repayment of a prior loan. An administrative fee of $90 is charged to each participant taking a loan and is automatically deducted from the participant’s account and added to the loan amount.

Payment of Benefits—Withdrawals from the Plan may be made as follows, as applicable to the participant’s eligibility, amount requested, and existing balances:

- 6 -

Table of Contents

Generally, withdrawals are allocated pro-rata to the balances of each of the investment funds in the participant’s account.

Basis of Accounting—The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of net assets available for benefits and changes therein. Actual results could differ from those estimates. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.

New Accounting Pronouncements—In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. SFAS 157 does not require any new fair value measurements; rather it specifies valuation methods and disclosures to be applied when fair value measurements are required under existing or future accounting pronouncements. SFAS 157 will be adopted in the Plan’s financial statements beginning January 1, 2008. Plan management believes the adoption will not have a material effect on the financial statements, but will require additional disclosure.

- 7 -

Table of Contents

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (“SFAS 161”). This Statement changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS 133”) and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for periods beginning after November 15, 2008, although early adoption is allowed. Plan management is currently evaluating assets held by the Plan to determine the impact of adopting SFAS 161.

Investment Valuation and Income Recognition—The Plan’s domestic investments are stated at fair value as determined by market prices quoted on U.S. securities exchanges. The fair value of foreign securities and foreign currency deposits is based on market prices quoted on foreign securities exchanges, and this value is converted to U.S. dollars using the exchange rate in effect at Plan year-end.

The pending trade payables are recorded net of related receivables and represent net amounts due to investment managers arising from security trading activities settled subsequent to year-end.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

Net Appreciation (Depreciation) in Value of Investments—Net appreciation (depreciation) in value of investments includes realized and unrealized gains and losses. Realized and unrealized gains and losses are calculated as the difference between fair value at January 1, or date of purchase if subsequent to January 1, and fair value at date of sale or the current year-end. The unrealized gain or loss on investments in the International Equity Fund represents the difference between fair value at January 1, or date of purchase, and the fair value at the date of sale or the current year-end plus, where applicable, the change in the exchange rate between the U.S. dollar and the foreign currency in which the assets are denominated from January 1, or the date of purchase, to the date of sale or the current year-end.

Administrative and Investment Management Expenses—Management and audit fees, which are paid by the Plan, are paid to the trustee based upon investment fund balances. Brokerage and other investment fees are included as a reduction of the net appreciation (depreciation) in fair value of investments. United performs certain administrative functions for the Plan without charge.

Payment of Benefits—Benefit payments to participants are recorded upon distribution. Amounts relating to participants who have elected to withdraw from the Plan but have not yet been paid were $1,429,065 and $907,937 at December 31, 2007 and 2006, respectively.

The Plan’s investments that represented 5% or more of the Plan’s net assets available for benefits as of December 31, 2007 and 2006, are as follows (in millions):

- 8 -

Table of Contents

During 2007, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $134 million as follows (in millions):

The Trustee is authorized to engage in the lending of certain Trust assets. Securities lending is an investment management strategy that utilizes the existing securities (government bonds, corporate bonds, or equities) of the Trust to earn additional income (approximately $861,104 and $631,567 in 2007 and 2006, respectively). It involves the loaning of securities by the Lending Agent (The Northern Trust Company) to a select group of approved broker-dealers. In return for the loaned securities, the Lending Agent simultaneously receives collateral from a borrower (such as in the form of cash, U.S. government securities and irrevocable bank letters of credit) as a precaution against possible default of any borrower on the return of the loan. Each loan is collateralized to the extent of 102% for domestic securities and 105% for international securities of the fair value of the loan (including any accrued interest if appropriate to particular securities). The collateral is marked-to-market on a daily basis to maintain the margin requirement.

Plan assets are invested by a group of investment managers. The investment managers buy or sell securities on behalf of the Plan, in accordance with the investment objectives and guidelines established for each of the investment funds.

- 9 -

Table of Contents

As of December 31, 2007, the investment managers were as follows:

The Plan allows certain investment managers to reduce the funds’ exposure to foreign currency fluctuations through the use of foreign currency forwards, options and credit derivatives. The Plan authorizes certain investment managers to earn equity returns on the funds’ cash position through equity

- 10 -

Table of Contents

index future contracts. Additionally, other investment managers use interest rate futures and money market futures to replicate government bond positions and manage interest rate exposure. Credit default swaps may be used by investment managers to effectively increase or decrease their exposure to individual corporate bond issues or baskets of corporate bond issues. They may also be used to effectively replicate corporate bond positions and manage overall credit risk. The Plan prohibits investment managers from being a party to any leveraged derivatives. All derivative positions are stated at fair value as determined by exchange quoted market prices or through other valuation techniques.

The Plan holds investments managed by Russell. Russell is the trustee as defined by the Plan, and, therefore, these transactions qualify as party-in-interest transactions. Total fees and commissions paid by the Plan to Russell for plan year 2007 totaled $14,640,525.

The Plan invested in shares of UAL common stock. UAL is the parent company of United and, as such, investment activity related to UAL common stock qualifies as exempt party-in-interest transactions.

The Company expects to continue the plan indefinitely, but reserves the right to terminate the Plan, in whole or in part, provided that Plan termination is effected by a written resolution adopted by a majority of the Board of Directors of the Company and subject to the provisions set forth in ERISA and the currently effective collective bargaining agreement with ALPA. If the Plan is terminated, employer contributions would cease and all amounts credited to a participant’s account at the time of termination shall be retained in the Plan and will be distributed in accordance with ERISA and the normal distribution rules of the Plan.

The IRS has determined and informed the Company by a letter, dated September 5, 2003, that the Plan and related trust were designed in accordance with applicable regulations of the Internal Revenue Code. The Plan has been amended since receiving the determination letter; however, the Company and the Plan administrator believe that the Plan is currently designed and operated in compliance with the applicable requirements of the Internal Revenue Code, and the Plan and related trust continue to be tax-exempt. Therefore, no provision for income taxes has been included in the Plan’s financial statements.

- 11 -

Table of Contents

At December 31, 2007 and 2006, certain participants had requested distributions from the Plan, but were not paid until the following January. No liability is recorded in the financial statements for such transactions. However, these amounts are included as a benefit payable in the Form 5500. The reconciliation between the financial statements and the Form 5500 is as follows (in millions):

The Plan was amended during 2007 to account for the treatment of settlement proceeds from litigation involving the terminated UAL Corporation Employee Stock Ownership Plan. In 2007, these proceeds were invested into the Plan for each eligible participant. The amendment also allows any employee or former employee with an account balance under the trust related to the terminated UAL Corporation Employee Stock Ownership Plan to transfer such amounts into the Plan.

In addition, the amendment stipulates if an employee of the Company who is a participant in another defined contribution plan becomes a participant of the Plan, his or her defined contribution account will immediately be transferred into the Plan and will continue to be subject to all the requirements, limitations and options of the prior plan. Additionally, if a participant of the Plan is transferred to another defined contribution plan, his or her account will be transferred to that plan and be subject to all the requirements, limitations and options of the Plan.

The amendment also provides which funds non-directed contributions will be invested in. In addition, the amendment provides any designated beneficiary, who is not the participant’s surviving spouse, may elect a direct trustee-to-trustee transfer of eligible distributions.

******

- 12 -

Table of Contents

SUPPLEMENTAL SCHEDULE

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 13 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 14 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 15 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 16 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 17 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 18 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 19 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007

- 20 -

Table of Contents

FORM 5500, SCHEDULE H, PART IV, LINE 4i—

SCHEDULE OF ASSETS (ACQUIRED AND DISPOSED OF WITHIN THE PLAN YEAR)

AS OF DECEMBER 31, 2007